CEO says Barrick has plenty of financial 'firepower' for deals
Danielle Bochove, Bloomberg News
BNN Bloomberg's Commentator Andrew McCreath discusses why investors should have a little bit of a position in gold heading into 2020. He says that balance sheet expansion is highly correlated with rising gold prices and that companies like Barrick generate large ammounts of free cash flow.
Barrick Gold Corp.’s chief says the gold miner has the financial heft it needs to support its loftiest ambitions -- and some day those might include a merger with Freeport-McMoRan Inc.
“Barrick, by end of next year, or during next year, will be net debt zero,” Chief Executive Officer Mark Bristow said Thursday in a phone interview. “We’ve definitely got the firepower to build a mine or to support a transaction. We don’t need any external support, for any of our ambitions, as we stand today.”
The world’s second-largest gold miner has been generating more cash flow, with higher bullion prices, even as it has sold assets. By the end of this year net debt will be under US$2 billion, Bristow said. “We’re going to settle all the near-term debt, and we’re left with debt that’s only due from 2023 onwards.”
In an interview last month, Bristow said there’s a logic to combining Barrick with Freeport as part of a broader gold strategy.
While it makes sense to start an “intellectual conversation” about a deal with the Phoenix-based copper miner, Barrick spent three years putting together its tie-up with Randgold Resources Ltd. and has no plans to rush into anything, he said Thursday. Any tie-up with Freeport would also have to be friendly.
“There’s no way we would do something in a hostile way because there’s too much risk in a transaction of that size and nature,” Bristow said.
Freeport didn’t immediately respond to a request for comment.
‘Focused on Quality’
Most of the mining companies that are capable of taking on Grasberg, Freeport’s massive copper-and-gold mine in Indonesia, wouldn’t dare because of the risks, Bristow said. But “if you’re focused on quality, you’ve got to look at the world’s biggest gold mines.”
Freeport emerged from a multi-year saga in 2018 which forced it to divest part of its stake in Grasberg in order to secure long-term mining rights in the country. The mine has also been the subject of global criticism for its waste-treatment practices.
For now, Bristow said there’s more chance of Barrick selling copper than buying it. Asked if that means a sale of its Lumwana copper mine in Zambia is imminent, he said the company has “received inbound interest, as you can imagine” but it doesn’t need to sell the asset.
The Toronto-based miner has a long-term gold strategy, not a copper strategy, Bristow stressed. However, “if we want to be a materially relevant organization focused on gold, we’re going to have to get our head around copper.”
“Freeport, undoubtedly is a company with a cluster of tier 1 assets and it’s the purest of all the copper miners,” he said.